Bagged or boxed? JLL predicts the future of 13 retail categories

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The way shoppers value time, touch and money drives on- or off-line purchasing

Online retail sales will grow by an average of 15 percent annually through 2020 according to eMarketer. But, the rate at which online versus in-store sales occur will vary drastically by category. JLL’s latest report explores the tie between how shoppers value goods and the way 13 retail categories will be sold.

“Shoppers each have a unique value system for determining how they buy and where they shop,” said Naveen Jaggi, President of Retail Brokerage, JLL. “We found that shoppers are motivated to go either in-store or hop online based on how much time they have, if they need to touch the goods and how much money are they willing to spend. The varying degrees of these values against different product types will determine how resistant they are to consolidation and migration online.”

Time constraints and time savings, like the ability to purchase 24/7 and avoid crowds and lines, were the strongest proponents for online shopping. Conversely, touch and the ability to see and try on items remains a key driver for in-store purchases. All things equal, most shoppers will choose the cheapest option. But, all things are rarely equal and shoppers must decide what’s most important to them.

The future outlook for the following 13 retail product categories was determined by consumer opinion data, store closure statistics, same-store sales growth and e-commerce penetration.

Brick-and-Mortar buying

The future of these categories are likely to remain entrenched in brick-and-mortar due to their ability to create experiences and joy, or thin margins that can’t absorb shipping costs.

1. Restaurants: are fairly protected against e-commerce penetration. The social sharing and food experience diners crave will out-weigh the convenience.
2. Off-priced retailers: offer a treasure hunt to consumers who want heavily slashed prices, which is not easily replicated online. E-commerce penetration is less than one percent, while same-store sales growth was more than three percent.
3. Dollar stores: have universal attraction and are all about saving money across all income levels. E-commerce penetration is relatively non-existent, with only a few new online entrants like Brandless and Hollar, which offer flat-rate pricing. Dollar store same-store sales growth reached nearly two percent.
4. Furniture stores: let shoppers test out and visualize their merchandise before buying. While e-commerce penetration is nearly 20 percent, this category will straddle the line of online and in-store but remain heavily focused on brick-and-mortar showrooms.

A Mixed Bag of Online + In-Store

Several categories will maintain a physical store presence, but up-scaled online offerings to cater to varied shopper needs.

5. Grocery: continues to inch into omni-channel with several players offering delivery and pick-up options. But, 93 percent of consumers still prefer to inspect their own produce. With fierce competition for market share we expect even more grocers to seamlessly integrate their offerings to meet the broadest swath of eaters.
6. Mass merchants: are popular among consumers due to their broad selection of goods, which kept same store sales neutral. E-commerce penetration is nearly five percent but set to grow as major players invest in their online platforms while maintaining their strong store presence.
7. Department stores: are feeling the heat from off-price and mass merchants, and are set to consolidate and shift sales online. E-commerce penetration reached more than 13 percent, but it’s likely that some players will maintain their vast portfolio of stores and up their game online.
8. Apparel concepts and fast fashion: represent a unique marketplace shift – there are many store closures due to bankruptcies, but conversely a growing number of openings. More than 75 percent of consumers prefer to buy their apparel in-store, but we expect that retailers will continue to sync their online and in-store experiences to provide a seamless experience for their shoppers.
9. Children’s goods and toy stores: saw a 16 percent jump in e-commerce sales as online retailers in this category offer huge time savings for parents. Sales in this category will increasingly shift online, but physical stores will be essential in crafting their brand experience.
10. Sporting goods: retailers have faced headwinds in the last year, with five top players filing for bankruptcy closing more than 200 locations. However, more than half of consumers still want to buy sporting goods in-store which will maintain the need for physical locations.

Bought and boxed online

Consolidation and commoditization in these categories is migrating sales primarily online.

11. Office supply: retailers have consolidated due to competition both online and from mass merchant retailers. This sector is expected to continue moving sales online as physical stores offer minimal experience, time and savings.
12. Electronic stores: that don’t offer an experience or point of differentiation are having a rough time, as e-commerce penetration in this category is nearly 10 percent. Stores like Apple and Best Buy that have a high-touch consumer draw will remain the outliers moving forward.
13. Book stores: have moved online with the highest e-commerce penetration of any category reviewed, nearly 25 percent. Availability of books has become commoditized, yet there remains a few independent book stores who offer in-store experiences and food and beverage options, who will stay relevant.

“In the next three years, the retail categories to watch are the ones caught in the middle between having a physical space and shifting to e-commerce,” concluded James Cook, Director of Retail Research, JLL. “Retailers in these five categories will have to both elevate their customer experiences in-store while also building a robust online strategy.”

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